The convenience of online loans, like payday installment loans, has been earning the patronage of people in need of immediate cash. Due to the increasing demand for payday installment loans, lenders offering these online loans have also increased. However, these loans come with high interest rates and expensive additional fees.
Despite the expensive costs associated with online payday installment loans, many people still turn to these financial options in times of desperate cash needs. However, the expensive costs, short repayment time and automatic renewal are not the only reasons that they are putting consumers at risk. The internet is loaded with fraudulent activities that are also putting online loan consumers at risk.
Online lending involves several dangers to their consumers. Online payday installment loans are often more expensive than the loans offered by storefronts. Aside from that, there may also be privacy and security issues involved during the application process. Even though it is easy to fill out an online application form and click the OK button, this simple process may turn out to be the action that puts you into a debt trap, making it hard to get out of the cycle of debt.
The Consumer Federation of America (CFA) has outlined 3 Risk Factors associated with online loans. They are the following:
· Online lenders can be hard to track down.
Most lenders of online loans provide very little information about themselves. They may provide their location and phone number on their website, but these can be hard to track down. Authorities have been unable to enforce laws against them despite the numerous laws and regulations implemented regarding these lenders. Oftentimes, it is much easier to track down activities and locations of storefront lenders rather than online lenders.
· Online borrowers are trapped in more serious debt problems than storefront borrowers.
Unlike storefront lenders where you can ask for extensions and make arrangements for alternative repayment terms, lenders of online payday installment loans are prone to have automatic renewal loan terms. Aside from that, online lenders automatically charge finance fees for late payments that are withdrawn electronically from the consumers bank account. In addition, defaulting loans are automatically renewed for an extra month.
The sad thing about this practice is that borrowers cannot do anything to stop lenders of online loans from doing this. In the end, many borrowers end up being trapped in serious debt problems. The process of negotiating with online lenders can be very complex because the borrower can only deal with the customer sales representative.
· The borrowers privacy and security is at risk.
When filing online application forms on the website of an online lender, consumers are asked to provide personal identification details, such as bank account information, routing numbers, Social Security Number, complete address, and other pertinent personal details. This crucial information is given to unknown lenders who may be hard to locate. Thus, consumers will be at risk of either identity theft or giving others access to their accounts. Although there are security measures that are given to borrowers, online lending is risky.
If you have already applied for an online loan, you may be at risk but there are authorities that you can turn to for help. You can file a complaint against an abusive online lender with the Federal Trade Commission, your state Attorney General or your state regulator.